Empirica

, Volume 43, Issue 3, pp 559–577 | Cite as

Could immigration explain wage inequality in a skill-biased technological model?

Research Paper

Abstract

The aim of this paper is to evaluate how immigration of high-skilled workers affects the technological-knowledge bias and, in turn, the skill premium in the host countries, in particular bearing in mind the recent experience in a number of European countries. We study a skill-biased dynamic general equilibrium R&D growth model in which the standard R&D technology is modified so wage inequality results from the direction of the technological knowledge, which in turn is induced by the price channel. By solving the transitional dynamics numerically, we show that the rise of the skill premium arises from the price-channel effect, complemented with a mechanism that reflects the impact of immigration on R&D. According to our quantitative results, our model is able to account for a significant proportion of the dynamics of the skill premium in the data for a number of European countries, thus, suggesting that differences in labour skills between immigrants and natives are, in practice, an important source of skill premium variation over time.

Keywords

Immigration Technological-knowledge bias Wage inequality Scale effects Numerical simulation 

JEL Classification

C61 O14 O31 O33 O47 

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  • Oscar Afonso
    • 1
  • Susana Gabriel
    • 1
    • 2
  • Pedro Mazeda Gil
    • 1
  1. 1.Faculdade de Economia and CEF.UPUniversidade do PortoPortoPortugal
  2. 2.Universidade Portucalense Infante D. HenriquePortoPortugal

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